Tags: Survey | Small | Firms | Stop | Cutting | Jobs

Survey: Small Firms Stopped Cutting Jobs in Oct.

Monday, 22 Nov 2010 10:34 AM

There was a tiny sign of hope in a monthly survey of small business owners recently, one that could mean they're getting ready to hire.

But that doesn't mean economists expect a big shift upward in the job market, and in turn, the rest of the economy, anytime soon.

The National Federation of Independent Business, which assesses the optimism of its members each month, said the average employment change per company was zero in October. In other words, small businesses overall weren't cutting jobs. Since April 2007, there have only been two quarters when the NFIB employment change was positive. That means that except for those two quarters, small businesses have been laying off workers.

So reaching zero was a bit of a milestone. But the key words in that sentence may be "a bit."

"There's small improvement going on, sure, but it's nowhere near where we should be in an economic recovery," said Raymond Keating, chief economist with the Small Business and Entrepreneurship Council. Like the NFIB, the SBEC is an advocacy group for small business.

The NFIB itself noted, as it also reported that its index of business owner optimism rose 2.7 points last month to 91.7, that "the index remains in recession territory."

The problem is that small companies, like a number of Fortune 500 corporations, are having a hard time raising revenue.

NFIB chief economist William Dunkelberg, in his analysis of the survey results, wrote: "it does not appear that sales trends are supportive of a recovery in the small business sector just yet, but they were a bit stronger in October than September."

And, like larger companies, small businesses are waiting for U.S. consumers to start spending more, something that most people are uneasy about doing while they see the unemployment rate stuck at 9.6 percent. Small companies, which historically have done the hiring that led the country out of recessions, aren't ready to do that in force.

"If you're looking at jobs, well, it's not there," Keating said.

There are some positive signs about hiring from larger companies.

Some big retailers, including Macy's Inc., Toys R Us, Pier 1 Imports Inc. and Amazon.com Inc., are hiring more people for the holiday season this year than they did in 2009.

But for a lasting improvement in the economy, small businesses do need to be hiring.

Dunkelberg noted that small companies' capital spending, which funds their expansion, remains weak. That indicates that overall, no blip up in hiring is coming.

One of the hardest hit industries is construction, because of the continuing slump in the housing market. While there are many big corporations that build homes, there are also many small businesses in the industry too. In the absence of homebuilding, many turn to renovation projects, but with consumers shy about any big outlays, that business is down too.

Besides an increase in consumer spending, owners are waiting to see what changes might be coming from the incoming Congress, Keating said. Among other things, he said, they're hoping for a change in the tax law that was buried in the health care overhaul bill passed earlier this year.

That change requires companies to report to the IRS any payments to vendors that total more than $600. The requirement means small businesses will have track all their spending and issue 1099 forms to suppliers if they've bought more than $600 worth of goods or services.

That's expected to create a big paperwork burden for owners, especially those whose companies don't have full-time help to do the work.

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